FHA Short Refinance
August 6, 2010
MORTGAGEE LETTER 2010 -23
TO: ALL APPROVED MORTGAGEES
SUBJECT: FHA Refinance of Borrowers in Negative Equity Positions
On March 26, 2010, the Department of Housing and Urban Development (HUD) and the
Department of the Treasury (Treasury) announced enhancements to the existing Making Home
Affordable Program (MHA) and Federal Housing Administration (FHA) refinance program that
will give a greater number of responsible borrowers an opportunity to remain in their homes. These
enhancements are designed to maintain homeownership by providing borrowers, who owe more on
their mortgage than the value of their home, opportunities to refinance into an affordable FHA loan.
This opportunity allows borrowers who are current on their mortgage to qualify for an FHA
refinance loan provided that the lender or investor writes off the unpaid principal balance of the
original first lien mortgage by at least 10 percent.
This Mortgagee Letter provides additional guidance for lenders regarding the requirements
and administration of these enhancements to FHA’s refinance program. These enhancements are
effective for loans with case numbers issued on or after September 7, 2010, which are closed on or
before December 31, 2012.
As noted below, these enhancements include loss coverage to be provided from
funds under the Emergency Economic Stabilization Act of 2008, as amended (EESA). If
the availability of such coverage is delayed beyond September 7, 2010, implementation of
these enhancements will also be delayed.
Eligibility
Participation is voluntary and requires the consent of lien holders. In order for a loan to be
eligible, the following conditions must be met:
1. The homeowner must be in a negative equity position;
2. The homeowner must be current on the existing mortgage to be refinanced;
3. The homeowner must occupy the subject property (1-4 units) as their primary residence;
4. The homeowner must qualify for the new loan under standard FHA underwriting
requirements and possess a “FICO based” decision credit score greater than or equal to 500;
5. The existing loan to be refinanced must not be a FHA-insured loan;
6. The existing first lien holder must write off at least 10 percent of the unpaid principal
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balance;
7. The refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent;
8. Non-extinguished existing subordinate mortgages must be re-subordinated and the new loan may not have a combined loan-to-value ratio greater than 115 percent;
9. For loans that receive a “refer” risk classification from TOTAL Mortgage Scorecard (TOTAL) and/or are manually underwritten, the homeowner’s total monthly mortgage payment, including the first and any subordinate mortgage(s), cannot be greater than 31 percent of gross monthly income and total debt, including all recurring debts, cannot be greater than 50 percent of gross monthly income;
10. FHA mortgagees are not permitted to use premium pricing to pay off existing debt obligations to qualify the borrower for the new loan;
11. FHA mortgagees are not permitted to make mortgage payments on behalf of the borrowers or otherwise bring the existing loan current to make it eligible for FHA insurance; and
12. The existing loan to be refinanced may not have been brought current by the existing first lien holder, except through an acceptable permanent loan modification as described below.
Principal Write off
The mortgagee must ensure that the existing first lien holder writes off at least 10 percent of the unpaid principal balance on the first lien. The short payoff serves as payment in full for any debt extinguished.
Calculating Mortgage
The refinanced FHA-insured mortgage must have a loan-to-value ratio of no more than 97.75 percent and all non-extinguished existing subordinate mortgages must be re-subordinated and may not result in a combined loan-to-value ratio greater than 115 percent.
The new FHA mortgage may be used only to refinance the unpaid principal balance on the first lien, plus the interest charged by the servicing lender when the payoff likely will not be received on the first day of the month, any prepayment penalties assessed, late charges, escrow shortages, closing costs, prepaid expenses, and discount points. The existing mortgagee must write off such amounts as described above.
Underwriting Requirements
All approved lenders must use FHA’s TOTAL to obtain risk classifications for each mortgage considered. If TOTAL renders an "accept/approve" result, the lender's underwriter does not need to perform a personal review of the borrower's credit history and capacity to repay. Lenders remain solely responsible for the data they supplied to TOTAL and to ensure that a Direct Endorsement Underwriter has reviewed the appraisal. FHA underwriting requirements at the time the case number was assigned must be used. Lenders must still comply with outstanding rate and term refinance eligibility requirements and ensure the integrity and accuracy of the data used to render a decision.
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Current Mortgage
In accordance with existing FHA requirements for rate and term refinance transactions, the mortgage being refinanced must be current for the month due. For example, for a FHA refinanced loan scheduled to close during November, the October payment must have been paid during October.
Borrowers who have undergone loss mitigation which resulted in a completed permanent modification may be eligible under the following circumstances:
If the modification was made under the terms of the Making Home Affordable Modification Program (HAMP), the loan may close the month following the date the modification was permanent. If the modification was a non-HAMP modification, the borrower must have made three monthly payments on time and the modified mortgage must be current for the month due.
If the loan is still in a temporary or trial period, the loan is not eligible.
Acceptable Credit History
Lenders must document an acceptable credit and mortgage payment history on loans referred from TOTAL for traditional manual underwriting. Indications of major derogatory credit events, such as judgments, collections, and other recent credit problems require sufficient written explanation from the borrower. Such explanations must be reasonable and consistent with the borrower’s other credit information.
Combined Loan-to-Value Ratio
Notwithstanding 24 CFR 203.32(c)(3), the combined amount of the new FHA-insured first mortgage and any subordinate non FHA-insured lien may not exceed 115 percent.
Permissible Secondary Financing
Secondary financing that permits borrowers to comply with the eligibility requirements of the program is permitted; however, such secondary financing is subject to the following limitations:
1. The terms of the subordinate lien(s) must not provide for a balloon payment before ten years, unless the property is sold or refinanced;
2. The terms must permit prepayment by the borrower, without penalty, after giving 30 days advance notice;
3. Periodic payments, if any, shall be collected monthly; and
4. If payments on subordinate financing are required, they must be included in the qualifying ratios unless payments have been deferred for no less than 36 months.
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Borrower Certification
The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted into law on July 21, 2010. Section 1481(d) of the Act provides that no person shall be eligible to begin receiving assistance under any mortgage assistance program authorized or funded by EESA if such person, in connection with a mortgage or real estate transaction, has been convicted within the last 10 years of any of the following: (a) felony larceny, theft, fraud, or forgery; (b) money laundering; or (c) tax evasion. Section 1481(d) becomes effective on September 19, 2010. As noted above, a portion of the claim amount will be paid under EESA authorities. Therefore, the Treasury Department will be requiring the mortgagor to provide a certification of eligibility under section 1481 for all loan applications dated on or after September 19, 2010. Further guidance on this certification will be issued in a subsequent mortgagee letter.
Mortgage Type and ADP Codes
The refinance type would be conventional to FHA refinance non delinquent. The chart below lists the applicable ADP codes for the refinance loans meeting the conditions in this Mortgagee Letter.
Fixed ARM 203(b)
821
822 Condo
831
832
Data Collection
In addition to the data collected at insurance application, FHA will collect the write off amount on the first lien being refinanced.
Paperwork Reduction Act
The information collection requirements contained in this document are pending approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB control number 2502-0579. In accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB control number.
Performance Analysis
HUD will analyze the performance of the refinance loans meeting the conditions in this Mortgagee Letter separately from lenders’ traditional FHA portfolios. FHA will develop a separate module in Neighborhood Watch to display a lender’s performance compare ratio for these loans. Loans originated in accordance with the above criteria will not be included in HUD’s performance analysis of a lender’s compare ratio with respect to the enforcement of the Credit Watch Termination initiative.
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Current monitoring practices such as the Post Endorsement Technical Reviews, Appraiser Watch, and Lender Monitoring Reviews will continue to monitor lenders, underwriters, appraisers for loan compliance under these enhancements. If a violation of the requirements contained herein, and/or of any FHA program requirements is found to have occurred, the lender will be subject to administrative action.
Second Lien Extinguishment and Servicer Incentive
To facilitate the refinancing of new FHA-insured loans under this program, Treasury will provide incentives to existing second lien holders who agree to full or partial extinguishment of liens effective on all case numbers assigned on or after September 7, 2010. To be eligible for incentives, the existing second lien mortgage servicer must: Execute a Servicer Participation Agreement with Treasury to participate in the Making Home Affordable Program; and, Agree to fully release the borrower from all obligations to repay the amount forgiven.
Existing second mortgage lien servicers will be entitled to a one time incentive of $500 for each successful closing. Existing second mortgage lien investors will be entitled to an incentive based on the combined loan to value of the existing lien and all senior liens associated with the mortgage. The actual incentive pay-out schedule and more information on this program will be available at www.hmpadmin.com.
Claims for Insurance Benefits
In the event of a claim for insurance benefits, funds under EESA authorities will cover a portion of the claim amount. Lenders will not see a reduction in the amount of the insurance claim on any given loan, but they will be required to submit a separate claim filing with the designated disbursement agent to be specified by us in a future Mortgagee Letter for that portion which is payable from EESA funds. This does not apply to home retention loss mitigation claims. Further guidance on the process for claims will be issued in a subsequent Mortgagee Letter.
Additional Items of Note
Mortgagees must make borrowers aware that, as with any loan forgiveness action, the short refinancing under this program may be reflected as a negative feature on a borrower’s credit score.
Mortgagees must also advise borrowers that they need to consult with their tax advisors regarding the cancellation of debt and possible tax consequence.
HUD conducted a Regulatory Impact Analysis for the enhancements contained in this mortgagee letter. It is estimated that between 500,000 and 1,500,000 borrowers will refinance using these enhancements and the net economic benefits will be between $11.774 and 35.322 billion. The full analysis is available at www.hud.gov/hudclips.
If you have any questions regarding this Mortgagee Letter, please call the FHA Resource
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Center at 1-800-CALLFHA (1-800-225-5342). Persons with hearing or speech impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).
Sincerely,
David H. Stevens
Assistant Secretary for Housing-
Federal Housing Commissioner
The Negative Equity Carryover Model: A Practical and Effective Solution to Our Housing Crisis and the Epidemic of Negative Home Equity
Negative home equity for America’s Homeowners has become an epidemic problem. Nationwide, homeowners are chained to their homes unable to sell due to the shackles of negative equity. This lack of mobility comes at a cost to society and at a time when the public’s need for mobility is at its greatest.
Industry needs this mobility to balance labor requirements, labor needs this mobility to find and create job opportunities, families need mobility to consolidate households and care for aging relatives and others to simply downsize into homes that they can manage and afford financially.
Banks are resistant to negotiate short sale settlements for the fear that the losses on these mortgages will spiral out of control and bring the banks to their knees. Many borrowers are choosing to strategically default in an effort to break the chains of negative equity in order to get on with their lives.
Negative equity, short sales and foreclosures have become a lose-lose situation for both homeowners and lenders.
The Federal Government needs to create legislation making it practical and feasible for banks to offer a safe and equitable alternative.
The “Negative Equity Carryover Model” proposes that negative equity be carried forward to the purchase of a subsequent home purchase or as a personal loan to the homeowner after the property sale.
Homeowners and banks won’t need to negotiate the loss of equity as is currently being done through short sales and foreclosures. Negative equity can be “carried” by a homeowner as a second lien into the purchase of another home or onto a credit report as a personal line of credit. The Model suggests that rather than write the loss off at time of sale through a short sale or foreclosure, the negative equity can be carried into the future as an independent debt/lien and slowly forgiven over an amortized timeframe. The homeowner’s credit would be saved and we as a nation could avoid the wholesale destruction and lockout of a future homeownership class due to damaged credit. Lenders could amortize the negative equity over years while still maintaining some lien position just in case homeownership equity returned.
Gil Kerbashian (847) 873-7295
Home Loan Closing Costs
Ahead of the Curve
Gil's Mortgage Resource Letter
Gil Kerbashian
"Understanding Closing Costs"
-Processing Fee Estimate: $350
This fee is charged by us to pre-approve, pre-underwrite and make sure your
loan fits program guidelines prior to us submitting the loan to an underwriting
unit for full approval.
We will review all documents, submit your package, insure compliance, attend
closing and maintain support all the way to closing. Fee paid directly to us at
closing. This fee also
includes credit reports, approval certificates and document gathering expenses.
-Discount Points to Buydown Rate:
Normally not charged unless a buyer requests or needs to buydown an interest
rate in order to qualify for the loan.
-Appraisal Fee Paid Directly to Independent Appraisal Company Estimate:
$275-$450 Upfront Cost
This fee is paid directly to an independent appraiser to determine the maket
value of your property. The appraiser is chosen by a neutral third party and
you must pay this fee
at the start of the loan process once a property is determined.
Underwriting Fee Paid to Independent Undewriting Unit Estimate: $600-$800
This fee is paid by you directly to the loan underwriting entity at loan
closing. Once we have pre-underwritten your loan and we have determined the
best lender able to actually fund your loan, we submit it to them for review,
approval, legal documents and funding.
-Homeowners Insurance Paid to Your Insurance Company Estimate: $300-$600
Upfront Cost
You will contact your personal insurance provider two weeks prior to your
closing date to determine the cost of a homeowners insurance policy. This will
be paid in advance of closing directly by you to the company you have picked. A
one year policy must be paid for in advance of closing. If the property is in a
flood zone, you will also be required to get flood insurance also.
-Mortgage Interest Payment at Closing Estimate: Depends on closing date.
Depending on the day you close, you will pay for the days of homeownership from
the day of closing to the last day of the month. Example: if you close on the
15th of the month
you will pay from the 15th to the last day of the month for each day you own
the home.
-Tax Escrow Paid Directly to Lender Estimated: Monthly property taxes times two
Most loans require borrowers to have the lender pay the property taxes on
behalf of the buyer. Unless you are putting in 10-20% downpayment, expect to
"escrow" for taxes. Lenders typically require a 2 month cushion placed into an
escrow account. Ex: $500x2=$1000
-Homeowners Insurance Escrow Paid Directly to Lender Estimated: $60-$120
Like taxes above, lenders will want to pay for your homeowners insurance when
it comes due. Most lenders will require a 2 month cushion placed into your
escrow account at closing.
-Settlement Costs- Closing Attorney, Title Insurance, Closing Company, County
Recording Fees Paid Directly to Providers Pre-Chosen by Others Estimate:
$1500-$2500
These are standard fees required to purchase a home. Refinances are much lower.
These fees are not chosen by us but rather chosen by your attorney or the
sellers attorney.
-Home Purchase Transfer Tax Stamps Estimated:
Call your city to see if buyers pay these Most common in the city of Chicago
and a few others. Not all cities or villages charge buyers a transfer stamp
tax. Usually a sellers expense. Can be expensive for buyers are charged.
**** In a home purchase transaction you may have the Seller of the Property pay
for some, most, or possibly all of the above expenses. This is called a "Seller
Paid Closing Contribution". This is highly recommended if you are short on
funds to close or currently only have your downpayment and no other funds
available.
If the Seller picks up your closing costs, any monies you pay up front other
than the home inspection (ie appraisal and homeowners insurance up front) will
be applied to your downpayment commitment.
Please call with questions
Tired of waiting for loan approvals? Worried if your home buyer will qualify?
Deal getting messed up at the bank and you want to move the file? I offer 24-48
hour full underwriting on FHA and Conventional home purchase transactions.
Think SERVICE From a committed purchase money specialist!
Industry Updates:
JULY 1st, now implemented: Fannie Mae's loan quality initiative is starting to
be implemented. 2nd underwriting signatures called for on some files prior to
funding, 2nd credit reports pulled prior to funding on all loans. CTC's may not
come until just prior to close. You may get conditions on files just days
before close. BE PREPARED.
FinReg looks to change the landscape of mortgage lending. Banks will be severly
impacted by the new regs causing delays while implementation occurs. Call me if
you need a bank alternative delivered with great service.
SAFE national mortgage act tests and background checks are now starting for
mortgage loan officers. Low credit scores, judgements, bankruptcies and other
character issues will be a factor going forward. Start working with a
responsible loan officer today!
The House has passed FHA reform legislation and MI Premiums look like they are
going up substantially (Senate to determine). Notify your homebuyers today-
dragging their feet to make an offer could get more expensive real soon!
$8,000 homebuyer tax credit extended until 2011 for Service Personnel working
overseas. Take advantage of VA 100% financing for veterans returning from Iraq
in August. No news as of yet about the extension on todays deadline.
Please don't hesitate to call if I can help.
Gil Kerbashian
Mortgage Lending Since 1997
Gil's Loan Pre-Approval and Funding Hotline: (847) 873-7295
Northwest Mortgage Services, Inc
7808 Virginia Road, Crystal Lake Il
Owner of Record Doesn't Work for Seller Designations on Purchase Contracts
May House Prices Show Highest Increase Since 2006
House prices climbed 6.8% in May 2010 from last year, the largest yearly increase since July 2006, according to a report from real estate data provider Clear Capital.
In June 2009, Clear Capital reported a 19.3% drop in May house prices, a "far cry" from the increase shown in this report a year later, said Alex Villacorta, senior statistician at Clear Capital. The rolling quarter-over-quarter number, which measures houses prices against those three months ago showed a 1.8% decline, an improvement from the 5% drop in April.
"We continue to see sustained price growth throughout much of the country with yearly price gains reflecting the housing recovery off of last year's lows," Villacorta said. "The expiration of the tax credit at the end of April has certainly contributed to the growth of prices we are observing and as more sales close before the June 30 deadline we expect that markets across the country will continue to see strengthening of prices."
The amount of REO properties on the market seems to be dropping, too, according to Clear Capital. The national REO saturation rate dropped to 27.8%, down from 41.7% last year.
"This dramatic shift in price trends reflects the unprecedented volatility over the last couple of years and the delicate state of local real estate markets around the country," Villacorta said.
While quarterly prices in three of the four regions remained below levels from three months ago – the 0.3% increase in the West being the only exception – prices should maintain positive momentum heading into the summer, according to the report.
Prices in Dallas, Texas increased 3.4% from the end of 2009, the highest jump for all markets over the last quarter. The REO saturation rate dropped to 36.6% from 41.1% there as well, but the largest reduction in REO saturation came in San Jose, Calif. There, the amount of REO on the market fell to 19.6%, and helping prices gain 2% from the previous quarter and 20.2% from last year.
The worse performing market in May was Detroit. There, prices dropped 10.7% from the previous three months, but it's an improvement from the 14.4% drop seen in the previous month. The REO saturation rate in Detroit reached 48.9% in May.
Tips for First Time Home Buyers
Tips for First Time Home Buyers
Before first time buyers begin looking at properties, they need to make sure they can qualify for a mortgage. The first thing any soon to be homeowner should do is obtain a credit report. Once a credit report is in hand, analyze it and determine what the monthly expenditures are.
Most banks and lenders allow borrowers to have a total debt-to-income ratio up to 45% or higher with strong compensating factors (or 41% max with private mortgage insurance).
By taking the total liabilities and adding it to a monthly housing payment, then dividing that number by the monthly gross income a home buyer can come up with a debt to income ratio.
Let’s use the numbers for and example:
$10,000 monthly gross income
$1,500 total monthly liabilities
We know from the above example that total monthly payments can’t exceed $4,500 or 45% DTI based on $10,000 gross monthly income.
So if the home buyer already has $1,500 in total monthly liabilities, the buyer can add a housing payment of $3,000 a month. $1,500 plus $3,000 equals $4500 or 45% of income
There are a number of mortgage calculators out there that will give the buyers a better idea of what they can qualify for. They can google Freddie Mac mortgage calculator to find an easy to use payment calculator.
Now that the home buyer has their credit profile in check and they know what they can afford, they'll need to show or secure verifiable seasoned assets for at least the down payment.
Funds to close can be gifted to first-time homebuyers using the FHA or VA program. Make sure the homebuyer has an account with at least the down payment available- a seller can pay for closing costs in most cases. Also, make sure the money in the savings account has been there for at least two consecutive months to ensure that it is seasoned (NO UNSOURCED CASH SHOULD BE USED). Banks and mortgage lenders don’t give much weight to unseasoned or cash assets because any friend, relative, Realtor or loan officer can easily dump assets into the buyers account before they apply for a mortgage to boost their net worth.
With all this preparation done, the loan flow will be a comfortable process with few surprises. It might not be perfect, but if the home buyer follows these steps they will definitely save money and reduce stress!
Let’s review the tips for first time home buyers in a condensed format:
- Order a credit report
- Review credit and clear up any derogatory accounts
- Do NOT open any new credit accounts or make any large purchases
- Calculate total monthly liabilities
- Figure out DTI and what can be afforded
- Make sure the homebuyer has a seasoned asset account with at least the down payment (for FHA a gift can be utilized as long as it can be fully sourced)
- Find the dream home and secure the purchase
- Lock your interest rate
Freddie Mac Important Internet Links
Freddie Mac Email Subscriptions
http://www.freddiemac.com/news/alerts/newscenteremail.html
Choose the Freddie Mac Bulletins, Announcements
and Publications you would like to receive notifications
of via email
Freddie Mac Forms & Guide Access
http://www.freddiemac.com/sell/guide/
Access Freddie’s Single Family Selling & Servicing
Guides as well as forms
Freddie Mac Learning Center
http://www.freddiemac.com/learn/
This website includes links to Quick Reference
Summary Charts on LP, Condominiums, Residency
and Citizenship, Various products, LTV/CLTV/HLTVs,
Refinances, New Construction, Income/Assets,
Collateral., Credit, and Super Conforming- just to name
a few!
Single Family Mortgage Products Page
http://www.freddiemac.com/singlefamily/mortgages/
This website includes links to Product Summaries,
Overviews, Marketing Materials, Affordable Income &
Property Eligibility Lookup Tool, FAQs, Links to live
product training opportunities and much more!
Training Events Page
http://www.freddiemac.com/learn/edu/train/
This page provides links to Live and Web Training
Events on LP, Underwriting, Product, Selling, Servicing
and Delivery-Related topics.
Loan Prospector Main Page
http://www.loanprospector.com/
This is the home page for all things LP! Features,
Benefits, documentation requirements, products, credit
report vendors, LOS vendors, news & highlights, best
practices, as well as login access to LP itself!
Loan Prospector Functionality Page
http://www.freddiemac.com/learn/uw/
This page provides resources and training associated
with documentation and underwriting-related topics
Loan Prospector Helpful Tips & Best Practices
http://www.loanprospector.com/getthemost/bp.html
This page provides links to guides that are very
detailed and well-written for originators, processors,
underwriters and quality control functions within an
organization. These are great reads for everyone!
Loan Prospector Training Page
http://www.loanprospector.com/learn/index.html
This page provides links to recorded training sessions
divided out by topic and category. These short
sessions are excellent educational resources that new
and even experienced LP users can benefit from!
Fraud & Quality Control
http://www.freddiemac.com/learn/uw/qc.html
This page provides links to Quick References
regarding predatory lending, property flips, appraisal
underwriting, documenting citizenship and residency,
rental income, standard income, Freddie’s
Exclusionary List, and standard quality control best
practices
Freddie Mac Homebuyer/Homeownership Page
http://www.freddiemac.com/corporate/buying_and_owning.html
This page includes various resources, tools and
information for both homebuyers and homeowners
Freddie Mac Loan Look-Up
https://ww3.freddiemac.com/corporate/
Determine if Freddie Mac currently services your own
or your borrower’s existing mortgage
Freddie Mac Marketing Kits & Materials
http://www.freddiemac.com/singlefamily/kits.html
Freddie offers excellent marketing materials in the form
of fillable flyers, mailers, post cards, door hangers,
brochures, and stuffers and some are even offered in
languages in addition to English! These are some of
the most professional-looking materials out there! Very
easy to sign up for access and easy to use!
Loan Program Changes
Debt to Income Ratio: Many FHA lenders will soon be or have started in the last few weeks introducing their own maximum debt to income ratios limits. This DTI limit resembles the same one Fannie/Freddie implemented in December. Please double check your buyer pre-approvals.
FHA HVCC: Feb 15. Appraisals for all FHA case numbers assigned to a property transaction on or after this day will require the appraisal to be ordered through an Appraisal Management Company (AMC). Same as conventional loans, FHA will require a neutral third party to "manage" the appraisal order process.
PURCHASE TAX INCENTIVE TIMELINE WARNING: April 30th is the last day for inked contracts. If you now have buyers/borrowers that are still waiting to make an offer, please let them know that they are shooting themselves in the foot. As the deadline nears, underwriting turn times will slow down substantially. If your buyers property shows an appraisal or inspection concern in the last few weeks of April, what time does it give you or the home buyer to correct the deficiency or start looking for another property? DON'T PROCRASTINATE!
IHDA: Down payment assistance program seminar at McHenry County Association of Realtors open to all. Feb 24th 10am. Call now to reserve your seat. Seating is limited. MCHCAR: 815.893.5100
Home Buyer Fliers
Understand Home Buyer Closing Costs
Processing Fee Estimate: $350
This fee is charged by us to pre-approve, pre-underwrite and make sure the home buyers loan fits program guidelines prior to us submitting the loan to an underwriting unit for full approval. We will review all documents, submit the package, insure compliance, attend closing and maintain support all the way to closing. Fee paid directly to us at closing. This fee also includes credit reports, approval certificates and document gathering expenses.
Discount Points to Buydown Rate:
Normally not charged unless a buyer requests or needs to buydown an interest rate in order to qualify for the loan.
Appraisal Fee Paid to Independent Appraisal Company Estimate: $275-$450 Upfront Cost
This fee is paid directly to an independent appraiser to determine the maket value of the property. The appraiser is chosen by a neutral third party and you must pay this fee at the start of the loan process once a property is determined.
Underwriting Fee Paid to Independent Undewriting Unit Estimate: $600-$800
This fee is paid by the home buyer directly to the loan underwriting entity at loan closing. Once we have pre-underwritten the loan and we have determined the best lender able to actually fund the loan, we submit it to them for review, approval, legal documents and funding.
Homeowners Insurance Paid to Your Insurance Company Estimate: $300-$600 Upfront Cost
The home buyer will contact their personal insurance provider two weeks prior to the closing date to determine the cost of a homeowners insurance policy. This will be paid in advance of closing directly by the home buyer to the company they have picked. A one year policy must be paid for in advance of closing. If the property is in a flood zone, the home buyer will also be required to get flood insurance also.
Mortgage Interest Payment at Closing Estimate: Depends on closing date.
Depending on the day of close, the home buyer will pay for the days of homeownership from the day of closing to the last day of the month. Example: if we close on the 15th of the month home buyer will pay from the 15th to the last day of the month for each day they own the home.
Homeowners Insurance Escrow Paid Directly to Lender Estimated: $60-$120
Like taxes above, lenders will want to pay for the homeowners insurance when it comes due. Most lenders will require a 2 month cushion placed into the escrow account at closing.
Fees Paid Directly to Providers Pre-Chosen by Others Estimate: $1500-$2500
These are standard fees required to purchase a home. Refinances are much lower. These fees are not chosen by us but rather chosen by the sellers attorney.
Home Purchase Transfer Tax Stamps Estimated: Call the city to see if buyers pay these
Most common in the city of Chicago and a few others. Not all cities or villages charge buyers a transfer stamp tax. Usually a sellers expense. Can be expensive for buyers if they are charged.
**** In a home purchase transaction the home buyer may have the Seller of the Property pay for some, most, or possibly all of the above expenses. This is called a "Seller Paid Closing Contribution". This is highly recommended if the home buyer is short on funds to close or currently only has the downpayment and no other funds available. Seller can pay up to 3% of the purchase price towards closing costs.
If the Seller picks up yclosing costs, any monies paid up front other than the home inspection (appraisal and homeowners insurance up front) will be applied to the downpayment commitment.
FHA FAQ's
FHA Foreclosures Rising
Rising FHA default rate foreshadows a crush of foreclosures
David H. Stevens (Andrew Harrer - Bloomberg)
|
Tuesday, February 2, 2010
The share of borrowers who are falling seriously behind on loans backed by the Federal Housing Administration jumped by more than a third in the past year, foreshadowing a crush of foreclosures that could further buffet an agency vital to the housing market's recovery.
About 9.1 percent of FHA borrowers had missed at least three payments as of December, up from 6.5 percent a year ago, the agency's figures show.
Although the FHA's default rate has been climbing for months and eating into the agency's cash, the latest figures show that the FHA's woes are getting worse even as the housing market shows signs of improvement. The problems are rooted in FHA mortgages made in 2007 and 2008. Those loans are now maturing into their worst years because failures most often occur two to three years after a mortgage is made.
If the trend continues and the FHA's cash reserves are exhausted, the federal government would automatically use taxpayer money to cover the losses -- a first for the agency, which has always used the fees it charges borrowers to pay for its losses.
As these loans from 2007 and 2008 go bad and clear off of the FHA's books, agency officials said, losses are expected to taper off, aided by the housing market's anticipated recovery and an influx of more creditworthy borrowers, who have flocked to the FHA's home-buying program in the past year.
Agency officials said they have cracked down on poorly performing lenders and announced higher qualifying fees for borrowers. On Monday, the agency projected that the fees should generate $5.8 billion in fiscal 2011, up from $2 billion this year. That would fatten the FHA's cash cushion, used to cover unexpected losses.
FHA HUD Links
• www.hud.gov - HUD Home Page
• www.fha.gov - FHA Home Page
• http://www.hud.gov/offices/hsg/sfh/ref/hsgregst.cfm - Subscribe to HUD’s Single Family Mailing List
• http://hud.gov/offices/hsg/sfh/events/events.cfm - HUD Single Family Events & Training Page
• http://hud.gov/offices/hsg/sfh/talk/parc/phiarch.cfm - Phili HOC Recorded Webinar Archives
• http://www.hud.gov/groups/lenders.cfm - HUD Lenders Page **NEW**
• http://www.hud.gov/offices/hsg/sfh/lender/mtgeekit.cfm - Title II Mortgagee Starter Kit of HUD Handbooks
• http://www.disasterhousing.gov/offices/adm/hudclips/handbooks/hsgh/ - Complete List of Handbooks
• http://www.fhaoutreach.gov/FHAHandbook/prod/contents.asp?address=4155-2 - Link to Home Page for new 4155.1 and 4155.2 Searchable Handbooks
• http://www.hud.gov/offices/hsg/sfh/ref/hsgrcont.cfm - HUD/FHA HOC Reference Guide
• http://www.hud.gov/offices/hsg/sfh/faqs/faqsmenu.cfm - HUD/FHA FAQ by Category
• http://www.hud.gov/faqs/faqbuying.cfm - HUD Common Questions Page
• http://www.nls.gov/offices/adm/hudclips/letters/mortgagee/ - HUD Mortgagee Letters
• https://entp.hud.gov/idapp/html/hicostlook.cfm - FHA Mortgage Limits Search
• https://entp.hud.gov/idapp/html/condlook.cfm - FHA Condominium Search
• https://entp.hud.gov/idapp/html/apprlook.cfm - FHA Appraiser Roster Search
• http://www.hud.gov/groups/appraisers.cfm - FHA Roster Appraiser Home Page
• http://www.hud.gov/offices/hsg/sfh/reo/reohome.cfm - HUD REO Home Page
• http://www.hud.gov/offices/hsg/sfh/owning.cfm - HUD Owning a Home Consumer Info Page
• http://portal.hud.gov/portal/page/portal/HUD/states - Links to State-Specific HUD Home Pages
• http://www.hud.gov/library/index.cfm - HUD Online Library-Links to Various Common Topics
• http://portal.hud.gov/portal/page/portal/HUD/webcasts/archives - HUD Webcast Archives-Recorded Webcasts
• http://portal.hud.gov/portal/page/portal/HUD/webcasts/archives/sinfamily - HUD Single Family Housing Webcast Archives
• https://entp.hud.gov/clas/index.cfm - FHA Connection
• http://portal.hud.gov/portal/page/portal/HUD/program_offices/administration/hudclips/forms - HUD Forms Search
• http://www.hud.gov/offices/hsg/sfh/fharesourcectr.cfm - FHA Resource Center Home Page
• http://www.fhaoutreach.gov/FHAFAQ/ - FHA Resource Center Searchable FAQ
• http://www5.hud.gov:63001/po/i/netlocator/ - HUD Employee Locator-Online Search Engine
• http://www.hud.gov/offices/adm/dds/ - HUD Direct Distribution Center- Order Publications!
• http://www.hud.gov/library/bookshelf11/hudgraphics/fheologo.cfm - Equal Housing Graphic/Logo for Printing
• http://www.hud.gov/offices/hsg/sfh/sys/caivrs/caivrs.cfm - HUD CAIVRS Home Page
• https://www.epls.gov/ - Excluded Parties Listing System Home Page (EPLS)
• http://www.hud.gov/offices/fheo/promotingfh/928-1.pdf - Fair Housing Poster-English Version
• http://www.hud.gov/offices/fheo/promotingfh/lep.cfm - Booklets HUD Materials in English and Other Languages
• http://www.hud.gov/offices/hsg/sfh/buying/homebuyingguide.pdf HUD Homebuying Guide for Consumers
• http://www.hud.gov/offices/hsg/sfh/buying/loanfraudfaq.pdf HUD Smart Consumer Fact Sheet
• http://www.hud.gov/offices/hsg/sfh/ins/hoctenyr.pdf - HUD Approved 10 year Warranty Plans
• http://www.hud.gov/assist/webpolicies.cfm - HUD Web Policies
Cash / Mattress Money is a Deal Killer
- Cash / Mattress Money is a Deal Killer-
AHEAD OF THE CURVE ARTICLE BELOW
Below is a list of my top programs that should be in every agents resource
folder:
-FHA closed on time: [http://www.realestateloans.com/fhadonewell.pdf]
[http://www.realestateloans.com/fhadonewell.pdf]
www.realestateloans.com/fhadonewell.pdf
-100% Rural Development: [http://www.realestateloans.com/usda.pdf]
[http://www.realestateloans.com/usda.pdf] www.realestateloans.com/usda.pdf
-$100 down for HUD owned homes:
[http://www.realestateloans.com/100hudhome.pdf]
[http://www.realestateloans.com/100hudhome.pdf]
www.realestateloans.com/100hudhome.pdf
-Deferred maintenance homes:
[http://www.realestateloans.com/uglyhomes.pdf]
[http://www.realestateloans.com/uglyhomes.pdf]
www.realestateloans.com/uglyhomes.pdf
-100% pre-approval to closing ratio:
[http://www.realestateloans.com/concierge.pdf]
[http://www.realestateloans.com/concierge.pdf]
www.realestateloans.com/concierge.pdf
-VA 100% financing: [http://www.realestateloans.com/va.pdf]
www.realestateloans.com/va.pdf
-Home Buyer job protection mortgage:
[http://www.realestateloans.com/rainydays.pdf]
www.realestateloans.com/rainydays.pdf
CASH IS KILLING DEALS:
I recently had a borrower call me and state she deposited $6000 into her
bank account from an unsecured loan. Without telling the Realtor or myself
she used this money for the contract deposit. Some form of outside monies
has been interjected into four of the last ten deals I've done and the
borrowers did it after reading
[http://gilkerk.realestateloans.com/condominiums/2009/05/07/i-need-to-make-a-home-loan-application-help.html]
my home purchase introduction link which clearly states that cash and large
deposits should be avoided.
Why isn't cash allowed into a transaction? It's the borrowers money right?
Several obvious reasons: Patriot Act/Banking Laws, Drug Money, Cash
Laundering, Straw Buyer considerations, Under the Table Seller Concessions,
Realtor or Loan Office contribution, Unsecured/unreported loan, Gift from
an unacceptable source, etc..
Loan officers and Realtors should never allow or encourage customers to
deposit or use cash for ANY part of the transaction nor turn a blind eye if
they know a client is borrowing money from credit cards or personal loans.
This type of mistake will certainly cause problems and create needless
tension. Now more than ever, loan files are being looked at with a fine
tooth comb. More and more careful verifications are being done a day before
closing- be prepared and don't let your deal die for dumb reasons.
Remember, FHA case numbers follow these loans. If one underwriter declines
a loan, the disposition will follow that loan. Realtors and Loan Officers
must work closely to prevent problems from day one.
Please call me at (847) 873-7295 to discuss nuances. Here to help you get
homes financed.
Is your loan officer less responsive than you'd like? Cut yourself free
from bad service, poor communication and start enjoying incredible support
today.
Could your team use an updated presentation to get agents up-to-speed on
loan program changes? Lending is a huge part of transactional business,
consider scheduling my lunch and learn for your team.
Gil Kerbashian
Mortgage Lending Since 1997
Gil's Loan Answer Hotline: (847) 873-7295
